Business review Management <strong>report</strong> Logistics and international sales Group sales by region % of Group sales 5 4 6 7 8 1 <strong>2011</strong> 3 Change to 2010 % (percentage points) 1 Russia 24% – 2 Asia 23% 4 3 Latin America 15% – 4 Europe 14% (5) 5 CIS 12% (1) 6 North America 8% – 7 Africa 3% 1 8 Australasia 1% – 76% of sales outside Russia 50 EuroChem Annual Report and Accounts <strong>2011</strong> 2 Logistics While our logistics function is not a <strong>report</strong>able business segment, it is a vital component of our vertically integrated business model. Capturing transportation margins allows us to reduce overall transportation costs and protect our market competitiveness. EuroChem’s logistics infrastructure includes port facilities and transhipment terminals, rail stock, and brokerage services. In late <strong>2011</strong> and early 2012, we acquired two Panamax vessels to complement the fleet of ships we rent on long-term leases. Our Tuapse Transhipment Terminal began operating in July <strong>2011</strong>. Located on the Black Sea coast, this terminal – our latest – is an important component of the future cost-competitiveness of our potash shipments from Gremyachinskoe, and is capable of handling 2.3 MMT of fertilizers per year. To support potash exports from our Verkhnekamskoe potash project we plan to construct a fertilizer transhipment facility of even bigger size in Ust Luga. Shipments of iron ore from Kovdorskiy GOK to Asian markets are despatched from our 1.5 MMT capacity Murmansk Bulk Terminal. In July <strong>2011</strong>, for the first time ever, EuroChem cargo ships, under nuclearpowered ice-breaker escort, took the Northern Sea Route to deliver iron ore concentrate from Kovdor to China. Following the Russian Arctic coast, rather than using the traditional routes via either the Suez Canal or the Cape of Good Hope, significantly reduced both delivery time and transportation costs. We also operate a terminal in Sillamae (Estonia) which has the capability to handle 800 KT of methanol and 200 KT of other chemical products per year. Additionally, EuroChem uses the Klaipeda (Lithuania) port facilities which can cater for 3.5 MMT of bulk fertilizers, 1 MMT of phosphate rock, and up to 0.5 MMT of liquid chemicals. To keep transportation costs down and minimize bottlenecks, we also own and operate a c. 7,000-strong rail stock and 45 locomotives. International sales Our international sales network currently includes the Swiss-based EuroChem Trading GmbH, which is responsible for global sales outside the CIS and North America; EuroChem Trading USA Corp., a Florida-based trading company responsible for North American sales; and EuroChem Comercio de Produtos Quimicos Ltda, which is based in São Paulo and supports our sales efforts in this rapidly expanding market. Revenues from these three companies are attributed to the Nitrogen and Phosphate segments. Reconciliation of segment and external sales volumes (KMT) <strong>2011</strong> Nitrogen Phosphates Distribution Other Intra-group sales External sales Nitrogen fertilizers Ammonia 242 – – – (210) 32 Urea 1,920 – 107 83 (120) 1,990 AN 1,732 – 499 0 (511) 1,724 UAN 719 – 78 101 ( 83) 815 CAN 191 – 52 – ( 61) 181 Organic synthesis products 442 – – – – 442 Phosphate fertilizers MAP, DAP – 1,866 122 – (140) 1,849 NP – 115 45 – (48) 112 Feed phosphates group – 240 12 – – 251 Complex fertilizers group (NPK) 401 0 239 2 (59) 583 Apatite concentrate – 166 – – (2) 164 Iron ore concentrate – 5,468 – – – 5,468 Baddeleyite concentrate – 12 – – – 12 5,647 7,868 1,154 186 (1,235) 13,623
i At Tuapse, one of our priorities was to build a new terminal using the best industrial and environmental safety standards in the world. Operating since July <strong>2011</strong>, it is capable of handling 2.3 MMT of fertilizer per year and is an important component of the future cost competitiveness of our potash exports from Gremyachinskoe. Annual Report and Accounts <strong>2011</strong> EuroChem 51 Business review
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